What Economic Model to Implement if Drinking Water Sources Run Dry?

The challenge to be met is immense: Ensuring lasting access to drinking water will require massive investments and a profound adaptation of practices. What economic model will this challenge? Two main tracks emerge: use the price of water to encourage sobriety, and rethink the management and financing of the drinking water service.

The right price to fix

In France, the drinking water service works as a natural monopoly: high fixed costs (maintenance of distribution networks, pumping stations and treatment plants) make any competition ineffective. The management of the service is entrusted to local communities, which can choose between at least two modes of organization: a public management or a delegation to a private operator.

For a long time, the effort has focused on the extension of networks, especially in rural areas. Pricing has targeted financial balance, in accordance with the principle of “water pays water”, without explicit environmental objective. The price of the cube meter remains, even today, low compared to the European average, even if it varies strongly depending on the territories. It combines a fixed part, a variable part as well as various taxes and fees.

Integrate an environmental dimension

Several devices have nevertheless encouraged the integration of an environmental dimension in the price of water to encourage sobriety, but have been the subject of strong criticism. The 2006 water and aquatic environments law, for example, encouraged the use of the “progressive” rate. This rate consists in modulating the variable part of the price as a function of the volume consumed according to predefined sections. The principle is simple: the more the home consumes, the more it will pay dear.

This system, attractive to the principle, nevertheless aroused low membership at the local level (barely ten services out of 8,000 in France before 2023). At the national level, the President of the Republic, Emmanuel Macron had evoked his generalization in response to drought, but the report of the EESC of November 2023 buried this proposal. Abroad of the municipalities, like Brussels, abandoned progressive pricing after having noticed its too many faults.

Why this rejection? Several obstacles limit the expected efficiency of this measure. It should be remembered that progressive pricing requires complete information of the consumer on their consumption. However, the billing of water in France remains little intelligible, in particular in collective housing where the apartments are only subject to re -invoicing once a year by their trustee. Worse, many old dwellings have no individual counting and their consumption is only estimated. In cities like Montpellier, only 33 % of housing is individualized and can be applied progressive pricing.

Progressive pricing, immediate defects

This is the reason why this rate of price can only work with the costly installation of meters in the accommodation. Progressive pricing has other faults, such as the fact that the slices do not adapt to the size of the household, then penalizing large families. In addition, they do not always apply to all users, since they will not concern, for example, professionals. Finally, their functioning implies a capacity of households to reduce their consumption, which is not as simple.

Should we give up to change behavior by prices? Not necessarily. Other approaches, such as seasonal pricing, could send a more readable price signal during periods of water stress. The objective: to make the consumer actor of sobriety, without complicating the system to excess.

Water sobriety at the heart of a new economic and governance model

Responsibility of consumers will not be enough: it is still necessary that the water will reach them. However, the resource also suffers from the dilapidation of distribution infrastructure. Water losses due to leaks represent 1 billion cubic meters each year, the equivalent of the consumption of 20 million inhabitants. The renovation needs are then considerable and represent, according to a study by the National Institute of Territorial Studies (INET), 8 billion euros for the years to come. How to ensure the financing of this “investment wall”? Several parameters deserve to be questioned.

First, the principle according to which “water pays water” implies that funding is essentially based on the increase in the price for the user. However, it will be necessary to arbitrate locally around the sharing of this price increase between professionals and households, but also between the subscription and the volumetric share. For example, increase the fixed share of the basic subscription so that secondary residences or occasional users – who use little water but still benefit from infrastructure – participate more in network maintenance costs. If the price increase is insufficient, the role of the water agencies to financially help the services in difficulty must be rethought better to set out of the periods of performance.

A role for intercommunalities

Then, inter -municipal cooperation can appear as a lever to finance investments in common. While today several thousand municipalities – often very small – manage drinking water alone and struggle to assume the self -financing of renovations, regroup would allow to pool the work. The 2015 NOTRI law precisely sought to encourage small services of less than 15,000 inhabitants to regroup, but arouses a lot of hostility at the local level. Even if the modality of cooperation can be improved, the collaboration of municipalities in network management appears essential.

Finally, the current economic model must be redesigned since operators' recipes are essentially based on the volumes invoiced. It seems contradictory to promote water sobriety if it leads it to lower the recipes. To resolve this difficulty, environmental performance clauses used in the waste sector could also apply in water contracts, which would compensate for the drop in volumes by premiums. This mechanism would be an effective lever that could be applied to all operators, public and private.

Indispensable national regulation

Beyond local contracts, many experts are pleading for a recasting of sector governance, drawing inspiration from foreign models. The idea of ​​a national economic regulator is making its way. Global management of the sector could gain consistency with the creation of a national economic regulator of drinking water. This independent authority could guarantee increased transparency, limit information asymmetries, and promote economical and sustainable practices. Water agencies could also evolve towards a regional regulation role, better integrating the challenges of the Great Water Cycle.

The French economic model of drinking water arrives at a turning point. Faced with climate change and vagaries that threaten our water supply, developing this model is no longer an option but a necessity. Smarter pricing, massive investments and coordinated in networks, new rules of the game for operators and reinforced regulation: these adaptations, far from being purely technical, affect a vital property whose management concerns us all. Drinking water has long flowed from source to France; Tomorrow, it will have to flow from renewed governance, capable of reconciling accessibility for users, financial balance of service and sustainable preservation of the resource.